By ERROL TOWNSHEND
Bankers, like virgins, lawyers and the odd celebrity golfer, are having a hard time of it these days. President Obama is breathing fire and brimstone from the White House, vowing to recoup every cent spent by Main Street on the bailout of Wall Street. Good luck to him. If he ever gets his proposed fee on the top 50 banks past a Congress already in the hip pockets of the bank lobbyists they’ll have to make him President for Life.
But even Obama, for all his oratory, political skills and the power of the Oval Office, can’t hold a candle to Jamaica’s Prime Minister Bruce Golding who has just pulled off the Mother of All Bloodless Coups. Without firing a shot, he has got Jamaica’s bankers and investors to cut the interest rate they earn on government bonds in half, from as high as 28 per cent to 12 per cent! Along with the Big Bad Wolf of Washington, the International Monetary Fund (IMF), they have put AK47s to the bankers’ heads and got them to “volunteer” and “agree” to cut their profits in half.
That’s a take-it-you-must condition for the IMF lending Jamaica US$1.3 billion to, you guessed it, pay for necessary and unnecessary imports from you know where. Of course, these bankers, not least of all Canadian Michael Lee Chin who owns one of Jamaica’s biggest banks, for years have been raking in sweet, frankly obscene profits. Can’t blame them. If you could make 28 per cent without lifting a finger, without taking a risk – repayment is guaranteed by Jamaica’s constitution – why take a chance with some misguided entrepreneur who wants a loan to start a factory?
What’s going on here has ramifications for the entire Caribbean and the rest of the Third World because if the IMF and Golding pull this off you can be sure this deal will be replicated elsewhere across the globe.
Jamaica, the crucible of pitched ideological battles between socialism and capitalism, IMF and Third World for much of the last quarter of the 20th century, is once again in the IMF test tube. Of course, it’s a good news/bad news story. The other side of the deal is steep jobs losses in the public sector and higher taxes just levied in December. Besides, 47 years after independence, Jamaica will now have to report daily, weekly, monthly, quarterly to its new masters in Washington as to how it’s meetings these IMF targets. IMF, like Obama, wants every cent of its money back.
Humiliation aside, the Golding-IMF experiment sounds good in theory. Picture the businessmen scared off by loan rates that topped 50 per cent back in the 1990s or the young, hot shot wannabees with MBAs, just back from North America. Sitting on the beach, knocking back a few cold ones, doing the crossword puzzle, raking in 20-28 per cent on government paper. Suddenly he’s cut to 12 per cent. He looks up from his paper and thinks about it for a moment. Does he cash in his bonds because the 12 per cent rate is too low and start a business which will help cut the rising jobless rate, as the IMF/Golding hopes?
Sounds like an attractive proposition…until he remembers the high energy costs, the skyrocketing security/insurance costs because of high crime, fights with unions, an educationally challenged workforce in the computer age, competition from cheap imports thanks to those liberalized trade laws signed by bird brain, pussycat leaders who really thought they could romp in the same cage with Asian tigers. Most will probably go back to the crossword puzzle and take the 12 per cent. For Jamaica’s sake, hopefully, a minority will seriously bite on the IMF bait.
Until the calls are put in to the lady of the house to ask: “Well darling, what do you think?”.
She’s busy packing for the next shopping trip to Miami and asks him why he hasn’t taken his meds since morning.
The Caribbean and the Third World is watching this ride.